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The Williamsburg Conference 1997

Hong Kong and China
Hong Kong's Transition

As this report is published, Hong Kong will be returning to Chinese sovereignty. The ceremonies and celebrations of July 1, 1997, are only part of the picture, though. Participants at the twenty-fifth Williamsburg Conference stressed that Hong Kong's transition is a process, not an event. It should be underscored that in this process the handover and its immediate result (while foreign journalists are in town) is only one chapter. With sensitive handling and careful support, there are very good prospects that the process will be a success.

The generally positive outlook of the participants contrasted with the often gloomy predictions about Hong Kong's future that have appeared in the international media. Yet they had reasons to be optimistic: the key players in the process have a stake in making the Hong Kong Special Administrative Region (SAR) a success. It was China that coined the concept of "one country, two systems" under which Hong Kong is to be governed for the next 50 years. That may have been in response to political and economic reality, yet China has much to gain from making the idea work. At issue is not only preserving Hong Kong's prosperity, though that will benefit China. China also hopes a successfully reintegrated Hong Kong can serve as a model for reunification with Taiwan, as the chief executive of the SAR, Tung Chee-hwa, told the Asia Society's annual dinner audience on the eve of the conference.

For their part, the people of Hong Kong are deeply attached to their way of lifeincluding their civil liberties, rule of law, and independent judiciary. There is some apprehension about the continuation of these institutions in the minds of most Hong Kong residents. No one should underestimate their role in preserving the economic and political freedoms guaranteed by the Joint Declaration and Basic Law and essential to Hong Kong's continued success.

Other countries and economies also have a strong stake in a stable transition and Hong Kong's continued prosperity. Taiwan has extensive economic interests in Hong Kong and southern China. These interests will remain a considerable force in preserving a pragmatic attitude toward Hong Kong, even if Taiwan's pro-independence Democratic Progressive Party (DPP) comes to power. The United States has a significant, long-term interest in the success of Hong Kong, which is home to 37,000 American expatriates. More than 1,200 U.S. firms operate in Hong Kong, including 450 that use it as their regional headquarters. The American people are keenly interested in seeing Hong Kong's freedoms preserved.

The "one country, two systems" formula has never been tested, and uncertainty is intrinsic in such a historic transition. Most risks were seen to be on the political front. Hong Kong's economic integration with China has already been largely accomplished over the past decade, and its role as provider of financial services and management expertise for China is expected to keep growing along with the Chinese economy, even with the increasing importance of Shanghai. With the seventh-largest stock market in the world, Hong Kong is a logical place to list the increasing number of Chinese state-owned enterprises expected to be brought to market as part of China's economic reforms. Hong Kong continues to make substantial investments in infrastructure and education that should encourage long-term growth. The rise of the service sectorwhich now represents 80 percent of the economyled to discussion of whether Hong Kong needs an industrial policy. Certainly, Hong Kong needs to continue broadening its already considerable global economic presence to compete in an increasingly global economy, but it appears well placed to do so.

Nonetheless, worries about the transition are understandable. Participants stressed the importance of preserving the rule of law in Hong Kong and expressed concern over the continued free flow of information amid reports of press self-censorship. Academic freedom is also a concern. China has said it will not tolerate advocacy of Taiwan or Tibet independencewould this rule out exploration of these topics in scholarly papers or debate? (Chinese participants rejected the idea that the "one country two systems" concept could be applied in Tibet or Xinjiang, saying the historical context was different.) And though Beijing pledges not to interfere in Hong Kong's affairs, can it prevent lower-level interference and resist pressure from Chinese citizens or interests to allow more access to Hong Kong or divert Hong Kong revenues or reserves to the mainland?

The new SAR government will also have to act sensitively. Participants expressed concern over Tung's failure to emphasize the unique international dimensions of Hong Kong, which transcend Chinese and Western ways, during his speech on amendments to the colony's Public Order and Societies Ordinance. Despite the pride of Hong Kong's 98 percent Chinese population in its cultural heritage, not all are comfortable with the political implications of the term "Chinese." The SAR government will also have some bread-and-butter issues to address, such as the widening gap between rich and poor and property prices that put home ownership increasingly out of the reach of the middle class. Will mainland "red chip" companies have to play by the same rules as everyone else?

The intense attention being given to Hong Kong's transition heightens some of the risks. Participants expressed concern that the U.S. Congress, influenced by the current wave of anti-China sentiment and reacting to often superficial media coverage of Hong Kong, could take precipitous and counterproductive action. In this context, the unconditional renewal of China's most-favored-nation trading status was strongly supported. At the same time, Chinese overreaction to events on the ground in Hong Kong was also seen as a risk. Participants urged all parties to handle the transition with sensitivity, and give the people of Hong Kong and their new administration a chance to prove that they can make the SAR work.